DCLG issues new cap on charges to leaseholders for improvement works

The Department for Communities and Local Government has issued new directions to councils and housing associations to cap charges to leaseholders for improvement works when they are wholly or partly funded by government.

The Social Landlords Mandatory Reduction of Service Charges (England) Directions 2014 can be viewed here. Discretionary directions allowing landlords to charge less – The Social Landlords Discretionary Reduction of Service Charges (England) Directions 2014 – can meanwhile be viewed here.

Outside London the maximum level will be levied at £10,000 in any five-year period, with a cap of £15,000 for the capital. Authorities will bear the outstanding costs of work themselves, the DCLG said.

The changes were introduced after a 93-year-old, Florrie Bourne, faced a £50,000 bill from Newham Council for roof repairs to her home in Brentwood, which was owned by the authority.

“Newham Council based its fee on a guess because it had not conducted a proper survey on the first-floor flat,” the Department said. “It later emerged the roof would have lasted another 40 years and the work was unnecessary.

“The family of Florence Bourne say she ‘died of shame’ because she had never been in debt in her life and simply could not afford to pay the bill for work on her Brentwood home.”

Communities Secretary Eric Pickles ordered a review of the legislation governing council house repairs after her case was brought to his attention.

Pickles said: “I was appalled at Florence’s treatment and was determined that no other leaseholder should ever have to endure the stress and hardship she experienced in the final weeks of her life…..

“Charging excessive amounts for council house repairs not only targets some of the most vulnerable people in society, it can amount to a failure in a local authority’s duty of care.”

A leasehold valuation tribunal found in 2013 that Newham Council had not commissioned a proper survey of the flat.

The DCLG has meanwhile announced that councils bidding for next year’s Decent Homes funding will also now be “required to make clear what help is available, including loans and deferred payment options, will have to offer affordable repayment terms and publish details of how they award contracts for the major works on their websites”.

The Communities Secretary has also asked DCLG officials to examine what further support can be offered to other leaseholders.

A spokesperson for Newham Council said: “The work carried out on this particular estate in Brentwood was carried out by a previous management organisation. We have since brought council housing stock under our control. Our leasehold services have been reviewed and robust new systems introduced. We will continue to do everything we can to improve living conditions for both tenants and leaseholders.”

The Department will look at:

• providing access to summaries of the determination of tribunal cases so people have a better understanding of the outcome;
• making it easier to get recognition of a tenants’ association;
• increasing awareness of what being a leaseholder means before people buy leasehold properties;
• gaining information on absentee leaseholders, especially where owners wish to buy the freehold;
• ensuring landlords provide a realistic valuation of the price a leaseholder would have to pay to buy the freehold or extend their lease;
• the specific issue of transfer (exit) fee covenants particularly found in the retirement leasehold sector by referring the matter to the Law Commission.

The outcome of the consultation on protecting local authority leaseholders from unreasonable charges can be viewed on the website.